What happened
Shares of Zscaler (ZS 1.28%) were up 4.3% as of 12:21 p.m. ET on Monday after Barclays analysts upgraded the stock to overweight from underweight with a $190 near-term price target.
The stock was crushed last year along with other expensive growth stocks. Zscaler has continued to report robust revenue growth this year, which has sent the stock up 52% year to date.
So what
Cybersecurity threats will continue regardless of how the economy performs, which is why Zscaler reported a 43% year-over-year increase in revenue in the fiscal quarter ending July 31. Cyberattacks are on the rise across every sector of the economy, creating a major tailwind for Zscaler's business.
In June, the company unveiled new artificial intelligence-based solutions to help organizations respond to threats faster, and last month, Zscaler and CrowdStrike Holdings teamed up to offer security solutions to healthcare organizations.
It's clear Zscaler should continue to grow at high rates for the foreseeable future, which likely influenced Barclays to issue the upgrade on the stock.
Now what
Zscaler has already doubled its annual recurring revenue to over $2 billion within the last two years. The company is seeing strong interest with new offerings, such as Zero Trust workload and data protection. Strong growth as it expands into new products is a great sign for the long-term growth trajectory of this top cybersecurity stock.
Another catalyst for the stock is growing free cash flow, which has increased from less than $100 million two years ago to $333 million. Further growth in profitability should support the stock's valuation.
